For Immediate Release
Chicago, IL – September 21, 2012 – Today, Zacks Equity Research discusses the U.S. Oil & Gas, including Chevron Corp. (CVX), National Oilwell Varco Inc. (NOV), Robbins & Myers Inc. (RBN), Tesoro Corp. (TSO) and BP plc (BP).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at
Considering the turbulent market dynamics of the energy industry, we always advocate the relatively low-risk conglomerate business structures of the large-cap integrateds, with their fortress-like balance sheets, ample free cash flows even in a low oil price environment and growing dividends.
Our preferred name in this group remains Chevron Corp. (CVX). Its current oil and gas development project pipeline is among the best in the industry, boasting large, multiyear projects. Additionally, Chevron possesses one of the healthiest balance sheets among peers, which helps it to capitalize on investment opportunities with the option to make strategic acquisitions.
Within the oilfield services group, we like National Oilwell Varco Inc. (NOV). We are a fan of National Oilwell’s healthy backlog, solid balance sheet and strength in international operations, particularly in the Middle East and Brazil. The impending Robbins & Myers Inc. (RBN) acquisition will further boost National Oilwell’s earnings visibility by expanding its blowout preventer product line; a critical safety machine for a well. The recent influx of offshore rig awards adds to the positive sentiment.
Buoyed by the favorable trends in the refining sector, we are more optimistic on the industry than we were 12 months ago. An uptick in economic activity overseas (mainly in developing countries) and prospects for higher fuel demand in the U.S. are likely to push 2012 industry margins higher than last year's levels. Against this backdrop, we are particularly bullish on Tesoro Corp. (TSO).
Tesoro’s decision to resume dividend payout and the announcement of a $500 million share buyback program make us optimistic about the company. Our positive stance also revolves around Tesoro’s proposed acquisition of British energy giant BP plc’s (BP) Southern California refinery, which, apart from boosting refinery capacity, will also improve the company’s operational efficiency. An uptick in crack spreads and Tesoro’s scale and diversification benefits afforded by its portfolio of seven refineries add to the positive sentiment.
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